State Supreme Court Adds Another Obstacle to Legal California Cannabis

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A new ruling out of the California Supreme Court this week will create yet another obstacle to the expansion of legal cannabis, at a time when more than half of the state’s cities and counties still ban retail stores.

The state’s highest court ruled Monday that San Diego failed to adequately analyze the potential environmental impacts of its dispensary law, a decision expected to limit the discretion of local governments across the state involving a range of actions.

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When the city adopted its 2014 dispensary law, it declared the change didn’t require analysis under California’s environmental laws. The court ruled unanimously, however, that San Diego indeed should have studied whether allowing dispensaries might result in construction of new buildings or changes in citywide vehicle traffic patterns.

The ruling will likely slow the expansion of the legal cannabis market in a state still dominated by unlicensed sales.

Local governments must analyze reasonably foreseeable changes that proposed laws or zoning changes would have on the environment, the opinion said, even if the changes would be indirect.

The impact of the ruling on many of the city’s 23 approved dispensaries wasn’t immediately clear, the Union-Tribune reported. City Attorney Mara Elliott’s office declined to comment on the 41-page ruling. “We will study this opinion to determine its potential impacts on city operations,” spokeswoman Hilary Nemchik said.

Lawyer Jamie Thomas Hall, who filed the lawsuit against San Diego, said the ruling would force the two-thirds of California cities that don’t allow retail cannabis stores to conduct more rigorous environmental reviews if they eventually consider allowing such businesses.

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That will likely slow the expansion of the legal cannabis market in a state still dominated by unlicensed sales. Allowing convenient access to purchase legal cannabis is one of the most effective ways to combat the illicit market.

The added layer of environmental review may also increase the already steep cost of opening a cannabis business in California, which could further advantage deep-pocketed license applicants who control an outsized portion of the nation’s emerging legal cannabis market.

Consequences Outside Cannabis

Hall said the ruling also limits the ability of cities to streamline state environmental laws to boost housing construction amid an ongoing affordability crisis.

“I think cities have been pushing the envelope of what is possible,” Hall told the newspaper.

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San Diego has passed a series of recent housing reforms, including one that gives density bonuses to housing developers. Another law, approved in March, allows developers to build large housing projects in transit areas with no parking spaces. The city adopted the reforms without conducting rigorous environmental reviews on potential impacts, whether direct or indirect, the newspaper said.

“It is a precedent-setting ruling,” Murtaza Baxamusa of the San Diego Building and Construction Trades, a powerful labor union, said of the court decision.

“Cities are essentially classifying entire city actions as categorically exempt without looking at whether there are any indirect, foreseeable impacts,” he said. “The court said the impacts could be negligible, but the fact that the city didn’t even look at it is a problem.”

The Associated Press contributed to this report.